How Much Should An Investor Budget For Maintenance Expenses?

Property managers follow several rules of thumb to estimate rental property maintenance expenses over the year. While they are different approaches, each rule results in similar numbers, and the overall goal is the same—to ensure that you have enough money set aside for both routine maintenance and unexpected emergencies. 

A few top rules to consider, depending on your property type, include: 

• 10% Rule: Maintenance and repairs cost about 10% of the rent yearly. So, if the property rents for $2,500/mo, then the maintenance budget should be $250 per month. Nestwell's preferred method.
• Square Footage Rule: Set aside $1 per square foot for annual maintenance costs. A 2,000-square-foot rental will need $2,000 in maintenance costs per year.
• 50% Rule: Set aside half of your rental income each month for repairs, maintenance, taxes, insurance, and other costs related to your property.

That is a wide range to budget for expenses, and that doesn't even factor in the most crucial thing: the home's age.

Some operating expenses are reasonably predictable, and the property owner should be able to budget for them regularly. Others, such as emergency appliance replacements, are more unpredictable, so real estate investors should allow for some surprise expenses.